TMI Tax Updates - e-Newsletter
April 30, 2016

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax

News

1. CSR Fund to Saansad Aadarsh Gram Yojana

2. Corporate Debt Restructuring

3. Registration of Companies

4. Financial Transactions of Companies

5. Nominating Women to the Board of Directors

6. Indian Accounting Standards

7. Green Finance – Early Initiatives (Shri R. Gandhi, Deputy Governor - April 29, 2016 - at the launch of the Final UNEP India Inquiry Report titled “Delivering a Sustainable Financial System in India”, Mumbai)

8. RBI Reference Rate for US $

Notifications

SEZ

1. S.O. 1464(E) - dated 8-4-2016 - SEZ

Set up a Multi Product Special Economic Zone at Gopalpur, District Ganjam, in the State of Orissa

Circulars / Instructions / Orders

VAT - Delhi

1. 2/2016-17 - dated 28-4-2016

Filing of online return for fourth quarter of 2015-16- extension of period thereof

Income Tax

2. PRESS RELEASE - dated 29-4-2016

Release of Data by Income Tax Department

Customs

3. 14/2016 - dated 27-4-2016

Carriage of coastal cargo from one Indian port to another port in vessels carrying out coastal runs

Highlights / Catch Notes

Income Tax

• Loan Waiver Not Taxable as Income Under Section 41 Due to Unfulfilled Waiver Condition in Assessment Year.

  Case-Laws - AT : Waiver of loan cannot be brought into tax net considering the fact that the waiver condition was not fulfilled during this AY and cannot be recognized as income u/s 41 - AT
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• Refund of TDS on Interest Possible for Assessee as Nodal Agency, Must Return Amount to State of Rajasthan.

  Case-Laws - AT : Credit of TDS deducted on interest - no prejudice will be caused to any person if the TDS is refunded to the assessee being the nodal agency with the undertaking to return the amount to the State of Rajasthan - AT
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• Section 54 Deduction: Residential House Construction Not Restricted by Specific Manner, Must Be Intended for Residential Use Only.

  Case-Laws - AT : Deduction claimed u/s 54 - There is nothing in these sections, which require the residential house to be constructed in a particular manner - only requirement is that it should be for the residential use and not for commercial use - AT
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• Penalty u/s 271C Requires More Than Just Assessee's Acceptance of Tax Deduction Liability Before Tribunal.

  Case-Laws - AT : Penalty under section 271C - Only because the assessee before the Tribunal had accepted her liability for deduction of tax at source, cannot be the sole basis for imposition of penalty - AT
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• Liquidated Damages for Delivery Delays Are Deductible When Liability Arises, Per Customer Agreements.

  Case-Laws - AT : Liquidated damages paid for delay in delivery of materials is deductible expenditure in the year in which the liability to pay arises as per the agreement between the customers - AT
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• Section 80P(2)(a)(i) Deduction Allowed: 89.10% of Loan Funds Used for Agriculture and Allied Activities.

  Case-Laws - AT : Claim of deduction u/s 80P(2)(a)(i) allowed - 89.10% of the total loan disbursed towards agricultural and allied activities - AT
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Customs

• Revenue Must Act Beyond Freezing Accounts in Alleged Fraud Case Over Excessive Duty Drawback Claims on Imitation Jewelry Exports.

  Case-Laws - HC : Excessive claim of duty drawback on export of imitation jewellery - This is not a case of an admitted fraud or a liability which is undisputed. Once there are allegations of fraud the Revenue has a larger responsibility and duty to the public. It cannot refuse to take all steps and rest only on freezing of bank accounts of the alleged defaulters - HC
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• Show Cause Notice Deadline: Must Be Issued Within 90 Days of Offence Report Under Regulation 22(1).

  Case-Laws - HC : Show cause notice required to be issued within 90 days from the date of receipt of offence report as per Regulation 22(1) - HC
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Service Tax

• Appellant Denied Benefits Under Notification No. 18/2009 for Failing to Meet Conditions; Pre-Deposit Waiver Rejected.

  Case-Laws - AT : Waiver of pre-deposit - Non-fulfilment of condition of Notification No. 18/2009 disentitles the appellant to the benefit of the said notification - AT
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• Foreign Service Provider Must Authorize, Not Indian Recipient; No Liability Without Proper Authorization.

  Case-Laws - AT : In terms of the provisions, “authorization” has to be specifically from the foreign service provider and cannot be fastened upon the Indian Service recipient by the Revenue - In absence of such authorization, no liability would fall upon appellant - AT
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Central Excise

• Allegation Deemed Vague: Appellant's Argument Credible, Cenvat Credit Eligible in Show Cause Notice Case.

  Case-Laws - AT : The show cause notice is the foundation for any proceeding. In this case, the allegation is too vague and therefore, the appellant's contention to the contrary cannot be doubted. Accordingly, cenvat credit is eligible - AT
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• Supreme Court dismisses appeal on duty-paid dipping chemicals; issue considered tax neutral, no further action needed.

  Case-Laws - SC : Receipt of duty paid dipping chemicals free of cost, availment of the duty paid as credit and excluding the cost of chemicals from the value of dipped nylon tyre cord fabrics - Apex Court dismissed the assessee's appeal since It would be futile to go into the issue if it is tax neutral.
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• Respondent with four prior offenses for concealing duty details denied relief in current settlement case.

  Case-Laws - HC : Entitlement of Settlement of a Case - earlier on four occasions the respondent herein was found guilty for concealment of duty particulars and penalty was imposed - Assessee is not entitled for relief. - HC
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• Cross-Examination Allowed After Petitioners Submit Reply and Adjudicating Authority Records Evidence.

  Case-Laws - HC : The correct stage for granting cross examination would be when the adjudicating authority records the evidence which can start only after the petitioners file their reply - HC
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VAT

• High Court Rules Entertainment Tax Applies to Polo Amusement's Activities for Subscribers' Guests Under Tax Definition of "Entertainment.

  Case-Laws - HC : Levy of entertainment tax - participation in the activities provided by Polo Amusement to its subscribers’ guest, i.e. Sea Wave, Lazy River, Fun Slide, Kiddies Pool, Aqua Shute, Aqua Ball, Super slide, are covered within the definition “entertainment” - HC
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Case Laws:

• Income Tax

• 2016 (4) TMI 1100
  Reopening of assessment - waiver of loan as income u/s 41 - reasons to believe - Held that:- AO had reopened the assessment on the ground that the waiver of loan by the bank has escaped assessment. The same was pointed out in the audit objection. We have perused the audit objection and the reasons recorded by the AO for reopening the assessment. No doubt, on record the reasons recorded by the AO are based on his own reasons of view, but, the same was indulged on findings of the audit objection raised by the audit party as it can be considered as it will fall in the similar situation as held in the case of CIT Vs. PVS Beedies (1997 (10) TMI 5 - SUPREME Court ). But as the findings recorded by CIT, the timings of the correspondence of Addl. CIT, which is dated 13/03/2013 and timings of the notice u/s 148, which was issued on 26/03/2013 clearly shows that the reopening was done on the behest of the Addl. CIT. It clearly shows that the AO had not applied his mind independently even though the reasons recorded on the basis of the factual error pointed out by the audit party. The reasons for reopening an assessment need to be based on tangible material which has a live-link with the formation of the belief that there was an escapement of income. Therefore, we do not find any infirmity in the order of CIT(A) in quashing the reopening of assessment made by the AO u/s 147 of the Act. Two instalments had to be paid in AY 2007-08. Even though, the assessee was following mercantile system, it cannot recognize the waiver of loan as income u/s 41 of the Act, since, as per the pre-condition for OTS, all the balance amount had to be settled, then only, the assessee can enjoy the benefit of loan waiver. In this case, it was clear that the assessee can only recognize the waiver of loan as income only when it pays the final instalment of waiver as per OTS conditions. Hence, the assessee was not in a position to recognize the above waiver as income u/s 41, on the contrary, the AO had not brought anything on record that the waiver of loan was relating to trading liability or any revenue expenditure was allowed against the above waiver. Hence, in our considered view, the above waiver of loan cannot be brought into tax net considering the fact that the waiver condition was not fulfilled during this AY and cannot be recognized as income u/s 41 during this assessment year - Decided in favour of assessee

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• 2016 (4) TMI 1099
  Credit of TDS - CIT (A) not allowing credit of TDS deducted by our Bank on interest and deposited to the Income Tax Department and holding that the interest belongs to Police department and the provisions of section 199 are applicable - Held that:- In the present case the amount was deposited as FDR’s by the assessee on behalf of State of Rajasthan with the Bank of Rajasthan and on the FDR’s deposit the interest has been accrued . The TDS was deducted by the Bank on the interest accrued on the FDRs. In our view, the Revenue is taking the hyper technical plea of not returning the TDS to the assessee on the pretext that the amount has been deposited with the bank on behalf of State of Rajasthan. Since the State of Rajasthan is not a taxable entity, therefore, refund of TDS cannot be given to the State of Rajasthan. It is not disputed that the assessee after realizing the interest income from the bank has given back the amount to the State of Rajasthan . Similarly it is also undisputed that the refund of TDS has not been claimed by the the State of Rajasthan and is only claimed by the Assessee being the nodal agency of the State of Rajasthan for this project . In our view, no prejudice will be caused to any person if the TDS is refunded to the assessee being the nodal agency with the undertaking to return the amount to the State of Rajasthan. The TDS deducted by the Income Tax Department is directed to be paid to the assessee and we accordingly hold the same. - Decided in favour of assessee

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• 2016 (4) TMI 1098
  Disallowance of the deduction claimed u/s 54 - two flats situated on different storey - Held that:- There is nothing in these sections, which require the residential house to be constructed in a particular manner. The only requirement is that it should be for the residential use and not for commercial use.We do not think that the fact that the residential house consists of several independent units can be permitted to act as an impediment to the allowance of the deduction under section 54/54F. It is neither expressly nor by necessary implication prohibited. Thus we reverse the order of the ld CIT(A) and allow deduction claimed U/s 54 of the Act by the assessee on two flats even on different storey. See Commissioner of Income Tax Versus Gita Duggal [2013 (3) TMI 101 - DELHI HIGH COURT]. - Decided in favour of assessee Disallowance of indexed cost of improvement - Held that:- CIT(A) not allowed the expenses claimed against the cost of acquisition from the total sale consideration on the ground that the evidence filed by the assessee are not reliable but neither the Assessing Officer nor the ld CIT(A) has verified the evidence, when the burden has been shifted by the assessee on the revenue on the basis of exemption claimed by the assessee where the particulars of civil engineer as well as name and address of the labourer have been given. The Assessing Officer has not issued any query letter to confirm the expenses as genuine. He simply discarded the evidence filed by the assessee, which is not permitted under the law. Even this indexed cost on boundary wall is not allowed by the lower authorities then the investment in two flats is about 42,92,921/-. The assessee invested much more than the capital gain calculated by the Assessing Officer, therefore, this addition is not called for. - Decided in favour of assessee

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• 2016 (4) TMI 1097
  Penalty under section 271C - Non deduction of TDS u/s 195 - DTAA between India–U.S.A. - Held that:- When the C.A. issued a certificate opining that there is no requirement for deduction of tax at source, assessee under a bonafide belief that withholding of tax is not required did not deduct tax at source on the remittances made. Though, this fact was brought to the notice of the Departmental Authorities in course of the penalty proceedings but due weightage has not been given to such contention of the assessee. In our view, the explanation submitted by the assessee is a valid explanation and cannot be brushed aside with some general observations. Only because the assessee before the Tribunal had accepted her liability for deduction of tax at source, cannot be the sole basis for imposition of penalty completely ignoring the primary and fundamental reason shown by the assessee for failure to deduct such tax. Proceedings under sections 201 and 271C, are two independent and separate proceedings. While imposing penalty, the authority concerned is duty bound to examine assessee’s explanation to find out whether there was reasonable cause for failure to deduct tax at source. As is evident, the assessee being advised by a professional well acquainted with provisions of the Act had not deducted tax at source. Therefore, no malafide intention can be imputed to the assessee for failure to deduct tax. More so, when the issue whether tax was required to be deducted at source, on payments to a non–resident for services rendered is a complex and debatable issue requiring interpretation of statutory provisions vis–a–vis relevant DTAA between the countries. Therefore, in our considered opinion, failure on the part of the assessee to deduct tax at source was due to a reasonable cause. The decisions relied upon by the learned Authorised Representative also support this view. Accordingly, we delete the penalty imposed under section 271C. - Decided in favour of assessee.

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• 2016 (4) TMI 1096
  Addition of liquidated damage - Held that:- Liquidated damages paid for delay in delivery of materials is deductible expenditure in the year in which the liability to pay arises as per the agreement between the customers. The CIT(A) has rightly deleted the addition - Decided against revenue.

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• 2016 (4) TMI 1095
  Claim of deduction u/s 80P(2)(a)(i) denied - Held that:- The assessee has clearly demonstrated through its loan disbursed statement that during A.Y. 2008-09, it had disbursed 89.10% of its total loan disbursed towards agricultural and allied activities. Similarly, during A.Y. 2009- 10, the disbursement towards these activities was to the tune of 86.41%. Hence, we hereby confirm the claim of assessee for deduction u/s 80P(2)(a)(i) of the Act for both the years - Decided in favour of assessee.

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• 2016 (4) TMI 1094
  Cash payment not supported by voucher - Held that:- The books of accounts were incorrectly rejected as it is not a case where it can be held that the books of account was incorrect or incomplete or correct profits could not be deduced. On the contrary, we find that completed audited books of accounts were produced before the AO, which were duly examined and such book of accounts have not been shown to have been maintained from where correct profits could not be deduced, thus vitiating the entire action of the AO and CIT(A) for rejecting the books of account. Further, there is no basis for applying rate of profit at 3% which is an ad hoc rate estimated by AO, so it falls particularly here we would like to state that the assessee has been incurring losses since start of production and the year in question is the first year where the results have been positive. The assessee falls under preview of various laws of the country such as Excise, Sales Tax, Provident Fund and Employee State Insurance and regular inspections/scrutiny’s by these Government departments is carried out. Accordingly, the results declared by the assessee are accepted and addition made including addition on account of exchange fluctuation in excess of the declared profit are deleted. Addition u/s 41(1) - Held that:- We notice that there is a fundamental misconception on the facts as appreciated by the AO and CIT(A). It is noticed that during the instant year, the assessee had shown in the beginning of the year unsecure loan of 8,04,75,496/- (Page 55 of the PB) which was reduced to 7,35,30,351/- on account of exchange fluctuation gain of 69,45,145/- which has been declared as part of exchange gain (Page 104 of PB). Further, there was a credit balance of M/s SPM at the beginning of the year of 59,20,969/- which was reduced to 50,09,447/- (Page 57 of PB). It was this balance which was confirmed at US $ 125,173.60 thus the balance of US $ 125,173.60 had nothing to do with the unsecured loan of 7,35,30,351/-. There is neither a payment towards the loan, nor there was cessation or remission of the liability of the loan. Even the AO has proceeded merely on conjecture to hold that such liability is the income of the assessee. There is no evidence to suggest that liability was squared up or paid. In the absence of any evidence to come to such impugned conclusion, the addition is arbitrary and has to go. Therefore, we order deletion of the addition

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• 2016 (4) TMI 1093
  Addition on unexplained jewellery u/s 69A - Held that:- In the present case, it is undisputed fact that the AO nowhere stated that the jewellery found during the course of search was more than what was declared by the assessee in the regular wealth tax return furnished much earlier to the search. As regards to the addition sustained by the ld. CIT(A) by presuming that the assessee might have incurred certain expenses for making the jewellery is concerned, it is noticed that nothing is brought on record to substantiate that all the jewellery was got remade during the year under consideration. In this regard, the explanation of the assessee was that the source of remaking in the earlier years was from household withdrawals. In our opinion, the ld. CIT(A) sustained the addition only on the basis of presumption which is not tenable particularly when no evidence was brought on record to disprove this contention of the assessee that the remaking charges were incurred out of household withdrawals made from time to time in earlier years. We, therefore, do not see any justification on the part of the ld. CIT(A) in sustaining the addition which was made on the basis of surmises and conjecture. Accordingly, the addition sustained by the ld. CIT(A) is deleted. - Decided in favour of assessee

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• 2016 (4) TMI 1092
  Disallowance under sec. 40A(2)(b) - whether assessee had unreasonably paid higher amount regarding purchase of guar gum from related parties? - Held that:- Sec. 40A(2)(a) provides that where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in clause (b) of this sub-section, and the Assessing Officer is of opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction. We find that no material was brought on record by the Assessing Officer to show that on the date of purchases made by the assessee from the sister concern, the market price of the goods was lower than the amount paid by the assessee to its sister concerns. In absence of the same, we find that the addition made has righty deleted by the Commissioner of Income Tax (Appeals) and calls no interference from us. - Decided against revenue Disallowance of trading loss - Held that:- No material was brought on record by the Departmental Representative to controvert the finding of the Commissioner of Income Tax (Appeals) that the Assessing Officer has accepted the profit of 7,96,81,577/- in respect of manufacturing activity and at the same time, has disallowed loss in respect of traded goods without bringing on record any material. All the purchases 2,80,09,637/- is erroneous and is deleted. Therefore, we find no good reason to interfere with the order of the Commissioner of Income Tax (Appeals)- Decided against revenue Deduction under sec. 80IA without setting off of unabsorbed depreciation of eligible unit - Held that:- The disallowance of deduction under sec. 80IA was made by the Assessing Officer in order to keep the issue alive as the department did not accept the order of the Tribunal and has filed appeal there against in the High Court. She admitted that the issue was covered in favour of the assessee by the order of this Tribunal in assessee’s own case for the Assessment Year 2009-10.)- Decided against revenue

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• 2016 (4) TMI 1091
  Deduction u/s. 80P(2)(a)(i) - Held that:- Assessee is entitled to deduction u/s. 80P(2)(a)(i) of the Act in respect of the interest income.

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• 2016 (4) TMI 1090
  Penalty u/s 271D - Held that:- It is an undisputed fact that the father of the assessee and his aunti and cousin have entered into an agreement with one Nathu Lal for sale of land and on account of sale of land, a sum of 19,50,000/- was received in cash. It is also an admitted fact that the amount of 19.50 lakhs was deposited by the assessee in his bank account as the father of the assessee was not having the PAN. Moreover, the said amount was not accepted by the banker of the father. The amount was thereafter deposited in the bank account on 16.12.2008 by the assessee. Immediately after depositing the amount, the amount of 10,00,000/- was transferred to the bank account of the father of the assessee Shri Niranjan Lal Sharma and the remaining amount was deposited by the assessee through account payee cheque in the accounts of Smt. Vinita Devi W/o late Shri Mahesh Kumar and Shri Ashish Sharma son of late Shri Mahesh Kumar. The assessee has also filed an affidavit with the Assessing Officer. The father of the assessee appellant has also declared sale transaction in his Income Tax return for A.Y. 2009-10. In our view, the assessee has given a reasonable cause for receiving the amount in his account and thereafter subsequently transferred the said amount to the account of his father and also the account of aunti Smt. Vinita Sharma and in the account of Shri Ashish Sharma, cousin of the assessee. In our view, since the assessee has given a reasonable cause for not complying with the provisions of section 271D, and the reasonable cause given by the assessee is plausible, in view thereof we have no hesitation to uphold the order passed by ld. CIT (A) by virtue of which the ld. CIT (A) has deleted the penalty under section 271D. - Decided against revenue

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• 2016 (4) TMI 1089
  Disallowance of carriage Inward expenditure - Held that:- Assessing Officer was not correct in disallowing 10% of such expenditure. We have gone through the submissions of the assessee and orders of the authorities below. The Assessing Officer disallowed the expenditure on adhoc basis without pointing out any specific instances, where supporting bills are not available. On perusal of financial statement filed by the assessee, we find that the expenditure claimed is very less when compared to related turnover. The assessee is into the business of trading in fertilizers which requires lot of carriage inward expenditure, as the goods are bulky and which needs to be transported to various places. Considering the nature and size of business, we are of the opinion that the disallowance made by the Assessing Officer is at higher side. During the course of hearing, the Authorised Representative of the assessee requested for scale down the disallowance made by the Assessing Officer. The Ld. D.R. on the other hand did not object for the proposal. Therefore, to meet the ends of justice, we direct the Assessing Officer to disallow 5% of carriage inward expenditure. Accordingly, we direct the Assessing Officer to disallow 5% of expenditure under the head carriage inwards. Disallowance of depreciation on motor cycles - Held that:- During the course of assessment proceedings, the assessee could not produce bills in support of the capital expenditure. The assessee’s contention is that it has bills in support of the fixed assets, however could not produce before the Assessing Officer by oversight. The CIT(A) held that even during the course of appellate proceedings, the assessee could not furnish bills in support of the expenditure. Even before us, the facts remained same. The assessee could not furnish any bills in support of the expenditure claimed. Therefore, we are of the opinion that the CIT(A) has rightly confirmed the additions made by the Assessing Officer. We do not see any reason to interfere with the order passed by the CIT(A)

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• 2016 (4) TMI 1088
  Claim of exemption u/s 54F - denial of claim as on the date of sale, the assessee owned more than one residential house and as per section 54F(1)(ii 12,66,515/- for two flat nos. 401 8,23,000/- for flat no.401 4,43,515/- for flat no.502 and the amount spent was appropriated out of the amount paid by the assessee on 20.7.2009 and 24.7.2009. On further verification of the ledger extract submitted by the builder, it was noticed that the assessee has paid an amount of 29 lakhs towards flat no.401 and 25 lakhs towards flat no.502. As per said ledger accounts, the total cost including registration and additional works incurred for the flat is 29 lakhs for flat no.401 25 lakhs for flat no.502. As against this, the assessee has claimed exemption of 35 lakhs for flat no.401 29 lakhs for flat no.502. The additional amount of 10 lakhs stated to be incurred towards additional work for flat no.401 12,66,515/- only has been incurred and this additional amount of 10 lakhs claimed by the assessee is not mentioned. The CIT(A) considering the details furnished by the assessee, denied the benefit of exemption u/s 54F of the Act. We do not see any error or infirmity in the order passed by the CIT(A). - Decided against assessee

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• 2016 (4) TMI 1087
  Interest on sundry debtors - Held that:- The debtor went into liquidation and the matter is pending before the BIFR. On further verification of the details submitted by the assessee, we find that the lenders have taken the possession of the assets of the company and given notice for auction. Under these circumstances, the A.O. was incorrect in charging interest on the outstanding debtor balance, when recovery of principal is in doubtful. The Assessing Officer, simply estimated the interest on the outstanding debtor balance based on the assessee own admission for the previous financial year. We do not see any merit in the contention of the Assessing Officer for the reason that the Assessing Officer cannot sit in the chair of the businessman and direct him to do business in a particular fashion. The outstanding amount due from the debtor is on account of trading liability. It is not a case of the Assessing Officer that the outstanding loan amount is a stock in trade of assessee and assessee is in the business of money lending to charge interest on the outstanding balance by following the mercantile system of accounting. Though, assessee charged interest for the last financial year, he explained the reasons for not charging the interest for the current financial year under consideration. From the perusal of the facts, it appears that the reasons given by the assessee appears to be reasonable. Therefore, we are of the opinion that charging interest on trade debtors is not correct. The CIT(A) after considering the relevant facts and circumstances of the case, deleted the additions made by the Assessing Officer. We do not see any error or infirmity in the order passed by the CIT(A). - Decided in favour of assessee.

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• 2016 (4) TMI 1086
  Applicability of provisions of section 44AF - Held that:- Total turnover is shown at 11,31,029/- which is not doubted by the lower authorities at any stage and the purchases of the assessee are explained and the profits of 2,22,214/- shown by the assessee is much higher than the profit @ 5% of turnover of 11,31,029/- calculated at 56,551/-, we are of the view that assessee’s disclosed income u/s 44AF of the Act at 2,22,214/- should have been accepted by the Revenue. Further as per second proviso to section 44AF assessee is also eligible for claiming deduction on salary and interest paid to its partners and in the case of assessee interest of 1,69,358/- and salary of 50,000/- has been shown to working partners and, therefore, assessee has rightly filed its return of income at NIL. We, therefore, are of the view that assessee is covered under the provisions of section 44AF of the Act and no addition was called for disallowance of purchases at 3,42,757/- and sustaining of disallowance on expenses @ 10% of 2,42,086/-, the same are deleted. - Decided in favour of assessee

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• 2016 (4) TMI 1085
  Penalty u/s 271D - Held that:- The fact that 15,00,000/- was received from Sri.K.C.Basheer on behalf of the assessee is undisputed, although the receipt of the amount or its utilisation are not reflected in the books of accounts of the assessee. Initially in his letter dated 13.12.2010, Sri.K.C.Basheer himself had confirmed that the payment was by way of a loan. It was on that basis the assessee was issued notice dated 24.02.2011. In his reply to the said notice the assessee had stated that he had not accepted any loan or deposit from anybody and that 15,00,000/- received on his behalf was towards advance for the property that was intended to be sold. It was along with that reply that he enclosed a clarification from Sri.K.C. Basheer to the effect that the amount paid was towards advance as contended by the assessee. The story that payment made was towards the advance was disbelieved by the Tribunal and the reasons thereof have been given by the Tribunal. Such being the case, we are clearly of the view that the transaction was correctly taken as a loan and if so the provisions of Section 269SS and Section 271D are attracted to the case. - Decided against assessee.

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• 2016 (4) TMI 1084
  Appeal admitted on the substantial question of law at question no.(ii) hereinabove. Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in upholding the orders of the CIT(A) in regard to the liability on account of warranties?

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• 2016 (4) TMI 1083
  Refusal of adjournment - breach of the principle of natural justice - Held that:- In the present case, it is not disputed that the matter was posted on 7.7.2015. It is also not disputed that prior to such date the appellant had only sought two adjournments. On account of some unavoidable reasons of the death in the family of the counsel of the appellant, the concerned counsel was unable to represent the appellant on the relevant date. The fact that there was a death in the family of the counsel of the appellant is not disputed by the learned Counsel appearing for the respondent. In such circumstances, considering that the appellant are not unnecessarily delaying the matter and as on the relevant date there was justifiable reason which prevented the counsel for the appellant to remain present before the learned Tribunal, we find that the learned Tribunal was not justified to refuse an adjournment. Hence, in the peculiar facts and circumstances of the case and in the interest of justice, the learned Tribunal could have given an opportunity of hearing to the appellant for the subsequent date. Having failed to grant a short adjournment has resulted in passing the impugned order in breach of the principle of natural justice which calls for the interference of this Court. The substantial question of law is answered accordingly.

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• 2016 (4) TMI 1082
  Mode of offering capital gains for tax on receipt basis - Held that:- In this case the amount of 20 crores is neither received nor it has accrued to the respondent-assessee during the subject assessment year. We are informed that for the subsequent assessment year (save Assessment Year 2007-08 for which there is no deferred consideration on application of formula), the Assessee has offered to tax the amounts which have been received on the application of formula provided in the agreement dated 25th January, 2006 pertaining to the transfer of shares. The contention of the Revenue that the impugned order is seeking to tax the amount on receipt basis by not having brought it to tax in the subject assessment year, is not correct. This for the reason, that the amounts to be received as deferred consideration under the agreement could not be subjected to tax in the assessment year 2006-07 as the same has not accrued during the year. As pointed out above, accrual would be a right to receive the amount and the respondent-assessee alongwith its co-owners have not under the agreement dated 25th January, 2006 obtained a right to receive 20 crores or any specified part thereof in the subject assessment year. In the above view there could be no occasion to bring the maximum amount of 20 crores, which could be received as deferred consideration to tax in the subject assessment year as it had not accrued to the respondent-assessee.We find that both the Commissioner of Income-Tax (Appeals) and the Tribunal have in view of the clear clauses of agreement dated 25th January, 2006 have in the facts of the present case correctly held that the respondent-assessee and the co-owners of the shares did not have a right to receive 20 crores in the subject assessment year. - Decided against revenue

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• 2016 (4) TMI 1081
  Addition to the income of the assessee-firm on account of purchases made - Held that:- It cannot be said that the transactions of purchases of 35,79,224/- as undertaken by the assessee-firm from M/s. Divya Fabric and M/s. N M Corporation are liable to be added to the income of the assessee-firm to fasten liability of taxation and we are of the considered view that the CIT(A) erred in confirming and sustaining the addition of 35,79,224/- to the income of the assessee-firm on account of purchases made by the assessee-firm from M/s Divya Fabrics and M/s N M Corporation as made by the AO in the assessment order and we delete the additions of 35,79,224/- made by the A.O. and as confirmed /sustained by the CIT(A) to the income of the assessee-firm. Disallowance u/s 14A - Held that:- We have observed that the current assessment year is 2006-07 and hence Rule 8D of Income Tax Rules,1962 is not applicable , which is held by Hon’ble Bombay High Court in the case of Godrej and Boyce Manufacturing Company Limited (2010 (8) TMI 77 - BOMBAY HIGH COURT) to be applicable from assessment year 2008-09 onwards. We have observed that the assessee-firm has worked the disallowance based upon the total expenditure claimed of 11,09,724/, after excluding the voluntary disallowances made by the assessee-firm of sales promotion of 5,42,800/-, STT of 6,036/- and necessary adjustment for depreciation as debited in P 11,09,724/- in the return of income filed with the Revenue and not 16,58,665/- as contended by the authorities below , which amount of 11,09,724/- was arrived at after the disallowance voluntarily made by the assessee-firm as set out above. Thus, we hold that disallowance of 1,27,914/- as worked out by the assessee-firm u/s. 14A of the Act is quite reasonable and is correct disallowance worked out by the assessee-firm . The orders of the CIT(A) upholding the addition to income of the assessee-firm by way of further disallowance u/s. 14A of the Act of 86,917/- in addition to the disallowance of 1,27,914/- u/s 14A of the Act as offered by the assessee-firm of its own is not justified based on the facts and circumstances of the case and our discussions and reasoning as set out above and the addition of 86,917/- to the income of the assessee-firm as confirmed/sustained by the CIT(A) is hereby ordered to be deleted.

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• 2016 (4) TMI 1080
  Grant of interest u/s.244A - Held that:- The assessee has legitimate right to claim interest on refund provided the assessee submits correct TDS certificate within the time and eligible for interest on refund. It is the duty of the assessee in case of manual certificate in form 16A to verify and submit to the Income Tax Department and rectify the defects at the earliest. Such delay shall not be a hindrance to the Department for granting refund. The provisions of section 244A(2) of the Act should be considered at the time of granting interest. The ld. Commissioner of Income Tax has examined the issue and called for the explanations and verified the provisions with the judicial decisions viz-a-viz explanations of the assessee and we are not inclined to interfere with the order of Commissioner of Income Tax in setting aside the rectification order of Assessing Officer for verification and examine on provisions applicable for granting interest. We, therefore do not interfere with the order of Commissioner of Income Tax and uphold the same. - Decided against assessee

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• Customs

• 2016 (4) TMI 1065
  Seeking release of goods - Tax already deposited - Samples were not taken in the presence of the petitioners and that it is without jurisdiction - Truck contained some goods of Indian origin and some goods of foreign origin - Held that:- it will be appropriate that the petitioners may file a representation before the Superintendent (Prevention), Customs Department, Lucknow Division, Lucknow raising all grievances. The petitioners can also apprise the officer that the goods of Indian origin are outside his jurisdiction and that even the goods of foreign origin can be released subject to payment of fine. If such a representation is filed, we have no reason to doubt that the Superintendent (Prevention), Customs Department, Lucknow Division, Lucknow shall take a decision expeditiously and preferably within a period of ten days from the date of filing of the representation. - Petition disposed of

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• 2016 (4) TMI 1064
  Seeking direction for release of bank accounts - Export of imitation jewellery - Petitioner indulged in fraudulent exports by inflating the Prevailing Market value and Free On Board value in order to claim duty drawback and other benefits - Held that:- We are not denying to the Revenue an opportunity of investigating or unearthing huge fraud. We are also not denying them their powers, but surely if drastic powers have to be exercised by public bodies, they must be exercised reasonably and fairly. We fail to understand if a huge and systematic fraud is alleged and perpetrated not only on the Revenue but on the public as a whole resulting in a voluntary deposit from the petitioner, then, why the investigations could not be concluded nor a show cause notice issued nor any steps taken till date. When such petitions are filed, it is our experience that detailed affidavits are filed in order to justify the act, but there is not a word about the delay. On 21st April, 2016, the deponent has time to file a very detailed affidavit-in-reply and file it in Court, but it is surprising that the Directorate and whole of it does not have time to proceed against those indulging in fraud on the public. A justification of this nature comes promptly only when parties like the petitioner complain of a freezing or attachment of their bank accounts and refusal to release them even if bona fides are shown. This is not a case of an admitted fraud or a liability which is undisputed. Once there are allegations of fraud the Revenue has a larger responsibility and duty to the public. It cannot refuse to take all steps and rest only on freezing of bank accounts of the alleged defaulters. That such an act and which is to be found traceable to different powers and of the nature conferred in the Customs Act, 1962, will not permit the respondents to deprive parties like the petitioner of their source of livelihood. They cannot stop their business by continued freezing of their bank accounts. It is further very clear and requires no reiteration that what is prohibited directly cannot be achieved indirectly or in an oblique manner. A refusal to carry out a duty in accordance with law cannot be justified by such a continued attachment and freezing of the bank accounts. In the given facts and circumstances, we do not see any justification for the same. Therefore, we direct that the bank accounts shall be released and this direction shall apply to all such accounts which are bearing the name of the petitioner in HDFC Bank and other banks whose names are also notified to the Revenue. The release shall become effective within 48 hours from today. - Decided in favour of petitioner

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• 2016 (4) TMI 1063
  Revokation of CHA licence and forfeiture of security deposit - Requirement of Regulation 22(5) not fulfilled - Held that:- this Court is not bound by the order of the CESTAT for its precedential value. A careful perusal of the said order reveals that no plea was urged by the said Appellant CHA before the CESTAT that the mandatory time limit under Regulation 22(5) of CHALR 2004 was violated. What has been recorded in the said order is a contention of the said Appellant that the time limit under Regulation 22(1) of CHALR 2004 was not adhered to. That time limit concerns the issuance of show cause notice "within 90 days from the date of receipt of offence report”. In that case there was no occasion for the CESTAT to consider whether the violation of the time limit under Regulation 22(5) of CHALR 2004 for submitting the enquiry report would vitiate the proceedings. No explanation has been offered by the Department for not adhering to the time limit of ninety days stipulated in Regulation 22 (5) of the CHALR. All that is stated in the memorandum of appeal is that the file could not be traced and therefore there was delay in the SCN being issued under Regulation 22(1) of the CHALR. The issue here is not so much about in the issuing of the SCN. It is about the unexplained delay of over three years in submitting the enquiry report. For the said delay the only explanation is that the first inquiry officer retired without submitting the report. This by no means justifies the extraordinary delay of more than three years after the date of the SCN in completing the inquiry and submitting a report. In the circumstances, the view taken by the CESTAT that the consequential order of revocation of licence is vitiated in law cannot be faulted with. No substantial question of law arise for consideration by this Court. - Decided against the revenue

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• 2016 (4) TMI 1062
  Seeking bail - Consignment of 37 kg of Methamphetamine seized - Applicant is involved in heinous crime of drug paddling - Earlier bail application is rejected upto the Apex Court - Held that:- delay if any in trial is solely attributable to the applicant and other co-accused, for which, no benefit could be granted to the applicant. It is submitted that as many as 16 applications were submitted either for regular, interim, temporary bail and at one stage even trial Court had observed that accused is trying to delay the trial by indulging into frequent applications devoid of merit and, therefore the application for bail is to be rejected. So far as, report received from Central Forensic Laboratory, New Delhi, is concerned it is a case for the trial Court to appreciate the evidence in light of materials available against the accused and at this stage no clean chit can be given to the applicant. Simply because the accused has remained behind the bar for about 4 ½ years and that another report of Central Forensic Laboratory, New Delhi described substances seized by the DRI has no Methamphetamine it cannot be said that the applicant-accused is not involved in the crime where ample material is available for the progress to establish its case before the trial Court. No material exists for this Court to satisfy that there are reasonable grounds for believing that the applicant is not guilty of offence under NDPS Act, and that he is not likely to commit any offence while on bail., That involvement of the applicant in the offence involving commercial quantity, prima facie, stands established by the prosecution and it is not necessary at this stage to discuss merit of the subject in detail as the trial is in progress. Further, allegations levelled against the applicant which also include statement of the applicant recorded under Section 67 of NDPS Act, 1985, who accepted 37 Kgs contraband manufactured in the factory where the applicant was the Managing Director, a case is made out by the prosecution to reject this successive bail application in absence of any merit. Therefore, no case is made out to exercise powers under Section 439 of the Code of Criminal Procedure, 1973 as prayed for. - Decided against the applicant

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• Corporate Laws

• 2016 (4) TMI 1058
  Claim of secured creditor denied - Held that:- In the present case, the State of M.P. has not been able to show that the assent received from the President either in 1958-59 or in 1995 or before the introduction of Section 33-C in 1976 had received such a particular assent. In other words, Presidential assent to this law which seeks to override or recreate first charge or charge which alone can rank the State’s dues along with those of secured creditors do not seem to have been established. To be fair to the Appellant, this question does not appear to have engaged the attention of the learned Single Judge who went by the plain language of the Section 529A of the 1956 Act and the provisions contained therein. For these reasons, this Court is of the opinion that the matter should be enquired into by the learned Single Judge which the State may establish, according to law, by producing all relevant materials which it may possess as to whether assent was sought in respect of the express repugnancy, i.e. with respect to Section 33-C of the 1958 Act and Section 53 of the 1994 Act. In the hands of a transferee for consideration without notice, such charge would not prevail over the dues of secured creditors who are subsequent transferees without notice. Since this question was not urged, the Court is of the opinion that the parties’ right to raise the contentions in this regard should also be kept open. In the light of the foregoing discussion, the impugned decision is hereby set aside and the matter remitted on the above question, i.e. whether the statute reserved for the assent of the President, specifically drew to the notice of the President (i.e. the Central Government) the issue of repugnancy between the provisions, i.e. Section 33-C of the 1958 Act and Section 53 of the 1994 Act on the one hand, and Section 529A and Section 530 of the 1956 Act on the other.

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• Service Tax

• 2016 (4) TMI 1079
  Waiver of pre-deposit - Violation of the provisions of Section 35F of Central Excise Act, 1944 - Appellant neither filed stay application nor made pre-deposit - Demand alongwith interest and penalty confirmed on the ground that the appellant was not eligible for the benefit of exemption Notification No. 18/2009-ST dated 7.7.2009 - Appellant contended that it satisfied all the conditions of Notification No. 18/2009 except that it did not file EXP-2 return every six months of the financial year within 15 days of the completion of the said six months which is only a procedural requirement. Therefore the benefit of notification should not have been denied. Held that:- it is evident that the said condition is a condition of exemption notification and therefore non-fulfilment thereof prima facie disentitles the appellant to the benefit of the said notification. In addition non-compliance with the provisions of Section 35F is prima facie a valid ground for rejection of the appellant’s appeal before the Commissioner (Appeals). Therefore, prima facie, we do not find any infirmity in the impugned order and accordingly we order pre-deposit of entire impugned service tax liability along with interest within four weeks. - Waiver not granted

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• 2016 (4) TMI 1078
  Seeking declaration that the search conducted and summons issued to be illegal and ultra vires to the provisions of the Finance Act, 1994 - Wrong availment of exemption under Notification No. 26/2012-ST dated 20th June, 2012 from payment of Service tax on some of the services provided by claiming to be a “tour operator” - evasion of payment of service tax. Held that:- it is not clear whether the DGCEI was conscious of the pending proceedings and show cause notices issued by the CST under Section 73(1) of the Finance Act, 1994 and the proceedings consequent thereto. This aspect is significant since the invocation of the powers of arrest without warrant under Section 90(1) read with Section 89(1)(ii) of the Finance Act 1994 presupposes the arrival of a satisfaction regarding the Assessee having collected service tax but failing to pay to the Department as envisaged in Section 89(1)(d) thereof. The question that would arise is whether there can be a pre-determination regarding the offence under Section 89(1)(d) of the Finance Act 1994 without issuance of a notice under Section 73(1) regarding the alleged evasion of payment of service tax, followed by an adjudication. In such circumstances, the Court is satisfied that the Petitioner has made out a prima facie case and accordingly an interim direction is hereby issued restraining the DGCEI from taking any further coercive action against the Petitioner or any of its officers or employees till the next date of hearing. As far as the proceedings consequent upon the arrest of the MD of the Petitioner pending in the Court of the learned ASJ is concerned, it will proceed in accordance with law and this Court expresses no opinion in that regard. Further, it is made clear that the Petitioner will continue to cooperate with the DGCEI, answer the queries and provide whatever documents are available in its possession as and when required by the DGCEI. - Adjourned for next hearing

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• 2016 (4) TMI 1077
  Demand of Service tax - Consulting Engineering Services - Availed services of foreign consulting firm and paid technical know-how fee to the said service provider, which was a lump sum amount as also royalty paid for the licence to manufacturer the goods, which was based on the price of the final products - Held that:- on examination of the agreement entered into between the appellant and foreign service provider, we fail to note any clause in the said agreement vide which the appellant has been “Authorised” to pay service tax on behalf of M/s.Kyaba. Admittedly, in terms of the provisions, such “authorization” has to be specifically from the foreign service provider and cannot be fastened upon the Indian Service recipient by the Revenue. As such, we fully agree with the ld. Advocate that in absence of such authorization given by M/s. Kyaba, no liability would fall upon him. Accordingly, the part of the impugned order of Commissioner (Appeals), which is challenged before us in the appellant's appeal is set aside. As regards the Revenue’s appeal, it is found that the Commissioner (Appeals) has dropped the demand by relying upon the earlier decision of the Tribunal in the case of Navinon Ltd. Vs. CCE, Mumbai -IV [2004 (8) TMI 2 - CESTAT, MUMBAI]. The only ground for the Revenue to challenge the said part of the impugned order is that the Tribunal’s decision in the case of Navinon Ltd. has not been accepted by them and stands challenged before the Hon’ble High Court of Bombay. On being questioned, both sides fairly agrees that the Bombay High Court’s decision is not available inasmuch as the appeal is still pending. However, there is no stay of operation of the earlier order of the Tribunal. Apart from that, it is also noted that the period involved is September, 2000 to Feb., 2002. In terms of the Hon’ble Bombay High Court’s decision in the case of Indian National Shipowners Association Vs. Union of India [2008 (12) TMI 41 - BOMBAY HIGH COURT], liability to pay service tax by any Indian recipient of the services from a foreign person would arise only w.e.f. 18.04.2006. Therefore, no tax liability can fall upon the appellant for the period prior to 18.04.2006. - Appeal disposed of

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• Central Excise

• 2016 (4) TMI 1076
  Mandatory penalty contained in Section 11AC of the Central Excise Act - No mention of penalty under Section 11AC of the Central Excise Act in the show cause notice and also in the Order-in-Original dated 30.04.2004. Because of these reasons, as far as this appeal and the special leave petitions are concerned are dismissed by the Apex Court

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• 2016 (4) TMI 1075
  Requirement to seek central excise registration - dual registration - Interpretation of Notification dated 28th February, 2014 - Notification interpreted erroneously and thereby the petitioner is forced to obtain a fresh or additional registration as importer of excisable goods when the same is not at all required as the petitioner holds a general and omnibus registration as a dealer - Held that:- it is apparent that the Cenvat Credit Rules, 2004 and the Rule to which our attention has been invited are still there in place. The Notification which purports to amend sub-rule (1) and seeks to enforce a condition of dual registration would have to be interpreted, but any prejudging the issue by us is unnecessary and at this stage. Once Mr. Jetly has clarified that the petitioners would be free to place their interpretation of the Rule and equally that no dual registration is contemplated by law and that a general registration would give way to any insistence on a special registration as an importer, then, all the more we need not interfere in writ jurisdiction at this stage. Once the petitioners would be served with a show cause notice so also others and none of them would be prejudiced in any manner because of any affidavit being filed in reply to the petition or any position or stand being taken therein, then, all the more by accepting the statements of Mr. Jetly this Writ Petition is being disposed of. It would be fair that once not only the petitioners and others are proceeded against then in their absence and they being not before us, none should be prejudiced by any interpretation or stand taken by the respondents and placed before this Court. Therefore, it is directed that until and unless the show cause notices are served and they are adjudicated in accordance with law, no coercive measures shall be initiated by the respondents and to recover any sums from the petitioners or those others whom the respondents intend to proceed against. - Petition disposed of

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• 2016 (4) TMI 1074
  Seeking cross-examination of certain witnesses - Petitioner submitted that show cause notice is based on several statements of witnesses including those of the experts and any reliance on such statements without offering such witnesses for cross examination would be opposed to the principles of natural justice. Held that:- the reasons cited by the adjudicating authority are completely baseless. Merely because, the concerned witnesses have not retracted their statements would not be a ground to deny cross examination. In fact, this reason does not even take care of the evidence of the expert witnesses. Further what material can the petitioner bring on record through cross-examination if so allowed, is simply not germane to the question of granting or not granting cross examination. The adjudicating authority entered into an arena of presumption while refusing such request on such ground. Having said that, the stand of the petitioners that such cross examination must be granted before the petitioners file final reply to the show cause notice cannot be accepted. The question of offering cross examination of the witnesses whose statements have been recorded by the Department during preliminary inquiry and which statements are sought to be relied upon, would arise during the adjudication proceedings. The correct stage for granting such cross examination would be when the adjudicating authority records the evidence which can start only after the petitioners file their reply. No statutory provisions are pointed out to us in support of the petitioners insistence of cross-examination of witnesses being granted before filing the defence reply. Therefore, it is directed that the petitioners shall file final reply if so desired, latest by 29th February, 2016, upon which, the adjudicating authority shall during the course of the adjudication proceedings, grant cross examination of the witnesses whose statements or reports are sought to be relied upon in the show cause notice and for which the petitioners have made request to the adjudicating authority. - Petition disposed of

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• 2016 (4) TMI 1073
  Whether the ground of financial hardship needed to be considered by the CESTAT - Effort is made out by the appellant to point out his financial hardship and the cash flow - Appellant submitted that he has been continuously overdrawing from the bankers. Also these grounds were brought to the notice of Commissioner (Appeals). Thus, these events needed appreciation by CESTAT - Held that:- While considering the issue of predeposit, CESTAT is not only expected to consider the prima facie case but also balance of convenience and for that purpose financial hardship, if any. If the appellant does not plead the same, CESTAT would not be required to consider it. But if there was any pleading to that effect, CESTAT was bound to go into the same. Impugned order does not show any consideration of financial hardship. Impugned order dated 29.7.2013, therefore, suffers from jurisdictional error. Even if pleadings are deficient or ground is not available on facts, that finding is to be reached by CESTAT only. At this stage, we are not inclined to set aside the order dated 29.7.2013 because in the meanwhile, pre-deposit as envisaged therein, has already been made. We allow the respondents to withdraw the amount deposited with the Registry of this Court along with the interest accrued thereon. In view of this, dismissal of appeal by the later order dated 28.1.2014 is unsustainable. That order is quashed and set aside and the appeal is restored to the file of CESTAT for its adjudication in accordance with law.

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• 2016 (4) TMI 1072
  Condonation of delay of 422 days - Delay is because the Registry notified five objections - Objections were complied with on 14th February, 2013 - Held that:- parties and advocates, including Revenue and their officials, take this entire exercise very lightly and casually. In terms of the Bombay High Court Original Side Rules, matters are taken up by high level Registry officials so that they are ready in all respects before they are listed before the Court for admission / hearing. This is to afford an opportunity to the parties and their advocates to comply with all procedural requirements set out in the Rules. There is a separate Board which is prepared and duly displayed. In the age of Information Technology, parties cannot now say that they are unaware of the matters being listed. The Prothonotary & Senior Master's board and the Court's board, for at least a week if not sooner, is available to the parties. Therefore, the routine explanation of the Revenue officials that it was the duty of their advocate and they were not required to follow up the matter/case with the advocate or with the Registry would mean sheer negligence and inaction. The Hon'ble Supreme Court has clarified in several judgments that the Revenue or Government is not a special litigant and deserves no such treatment. It is as much bound by the law and rules of limitation as every other litigant. The Governmental inefficiencies, deliberate inaction, negligence and bureaucratic ignorance which could be deliberate as well are not reasons which can be said to be sufficient cause for condoning delay and for all times and in all matters to come. If the Revenue officials feel that it is the duty of the advocate alone and they must not follow up the cases filed in the High Court, then, they ought to be realising that the assistance and sympathy uptill now shown by this Court is grossly abused. Now it is seen as a right to ignore matters which are filed and to not attend the Court or not to depute anybody to attend the Court offices so as to render the Court Registry the requisite assistance. The Revenue and the Government is the biggest litigant in Courts. It ill comes from the Government that this Court does not dispose of matters in a timely manner and delay defeats justice. First of all why there is a delay and which could be the result of its complete negligence or deliberate inaction is something which the Government must ponder and correct for itself. This Court is not going to accept the routine explanation and which in this case hardly inspires confidence. The public at large is fully aware of all this and if crores of rupees are at stake, the Registry of this Court is not expected to entertain the Revenue and Government officials in a distinct manner. Equally, the Revenue officials and their advocate should be vigilant and not allow matters to go in default like in the present case. They are themselves to be blamed for this mess and they cannot request the Court to accept any cause as sufficient and reasonable when that is bereft of accurate particulars, and details. The statements in the affidavit-in-support are not correct. Therefore, the reasons cannot be said to be sufficient cause. - Decided against the revenue

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• 2016 (4) TMI 1071
  Imposition of penalty - Violation of Rule 209A of the Central Excise Rules, 1944 - Import of scrap into India and sold it locally - Held that:- the appellant was an importer and cleared the goods after payment of duty of excise. Rule 209A imposes three requirements to be satisfied before a penalty could be imposed. Those requirements are (1) that the person concerned should have acquired possession of or in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing or in any other manner dealing with the goods; (2) that such goods must be excisable goods and (3) that he must have knowledge or reason to believe that those goods are liable to be confiscated under the Central Excise Act or the rules. Let us assume that first requirement is satisfied but the goods were not excisable goods. The appellant is only an importer. Even according to the show cause notice or the orders of the authorities, the appellant is not engaged in any manufacturing activity. The goods did not become excisable goods at the hands of the appellant. It is only at the hands of the Company Chamak Holdings Limited, that the goods became excisable goods due to the manufacturing activity undertaken by that company. Therefore, the second requirement is not satisfied. The third requirement is also not satisfied since the goods were not liable for confiscation at the hands of the appellant. The appellant is not alleged to have defaulted in payment of customs duty or evaded the payment of excise duty or alleged to have cleared the goods out of the port clandestinely. Therefore, so long as the goods remained with him, they are not liable for confiscation. They would have become liable for confiscation after the purchaser manufactured the finished goods and sold them without invoices, thereby escaping payment of duty of excise. Therefore, the third limb of the rule is also not satisfied. Hence, the order of the authorities are unsustainable. - Decided in favour of appellant

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• 2016 (4) TMI 1070
  Job Work - Removal of drums without payment of duty - Held that:- the Company was undertaking a job work. M/s. HPCL and will not allow its raw material to be utilized for the manufacture of drums for others or to allow to dispose of the production of drums in any manner other than to supply them. That is how the allegations in the show-cause notice regarding deliveries of drums to undisclosed parties was denied and termed as imaginary. Once the job work was the activity undertaken and there was a denial of the liability to pay duty, so also on the above material that the least that is expected of a last fact finding authority, viz., the Customs, Excise & Service Tax Appellate Tribunal is to consider this aspect in detail. That it is factual but necessarily requires and merits its consideration goes without saying, else, a party like the Appellant has no opportunity to satisfy any authority that the adjudication is not in accordance with law and that there is a perversity in the order-in-original. If as an Appellate Authority, the Tribunal does not wish to examine this, then, its refusal raises a substantial question of law. The last fact finding authority, viz., the Tribunal should have gone by the record. By not considering the record in its entirety and referring to some isolated event that too in an incomplete manner leads us to the only conclusion that the Tribunal has failed to perform its duty and in accordance with law. - Matter remanded back - Appeal restored before the tribunal.

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• 2016 (4) TMI 1069
  Eligibility of Cenvat credit - Management, Maintenance and Repair service of helicopter - Department denied credit on the ground that the helicopter was not exclusively used for the appellant's unit at Viralimalai - Appellant filed copy of Invoices raised by the appellant company on other companies for the usage of Helicopter and Service Tax has also been collected under the category “Business Auxiliary Service” - Held that:- there is no requirement under Rule 2(l) of the Cenvat Credit Rules, 2004 which defines 'input service' that the usage has to be in relation to a particular unit. Input service definition during the period in dispute i.e., March 2010 to April 2010 was very wide and the inclusive definition covered “activities relating to business”, which has not been taken into consideration. The denial of credit is therefore incorrect and unsustainable. Eligibility of Cenvat credit - RentaCab service and contract bus service - used exclusively for the transportation of officers - Commissioner (Appeals) has held that they recover the cost from the employees and there is no denial of the same - Held that:- a consistent stand taken by various Courts and Tribunals is that when there is a recovery of cost, the proportionate credit should be reversed. The denial of the entire credit is erroneous and the appellants are directed to reverse the proportionate credit to the extent of recovery of cost from the employees. Eligibility of Cenvat credit - Management and consultancy service - Held that:- there is no requirement in the input service definition that the eligibility to credit is factory based. The consultancy provided has not been disputed. When there is no dispute on the consultancy provided, denial for the reason that, there is every reason to believe that his consultancy service is not meant for the exclusive use of the appellants unit alone in the show cause notice without elaborating as to the reason for the said belief is unsustainable. The show cause notice is the foundation for any proceeding. In this case, the allegation is too vague and therefore, the appellant's contention to the contrary cannot be doubted. Accordingly, credit is eligible. Imposition of penalty - Held that:- the issue being interpretative in nature, penalty is not warranted and the same is accordingly set aside. - Decided in favour of appellant with consequential relief

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• 2016 (4) TMI 1068
  Duty liability with interest and penalty - Receipt of duty paid dipping chemicals free of cost, availment of the duty paid as credit and excluding the cost of chemicals from the value of dipped nylon tyre cord fabrics - Tribunal has decided the matter in favour of assessee reported in 2007 (3) TMI 613 - CESTAT, CHENNAI by declaring the entire issue as tax neutral - Apex Court dismissed the assessee's appeal since It would be futile to go into the issue if it is tax neutral.

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• 2016 (4) TMI 1067
  Entitlement of Settlement of a Case - Introduction of the "Explanation" to section 32-O(I)(i) of the Central Excise Act, 1944 - Whether with the introduction of the "Explanation" to section 32-O(I)(i ) there was a change in law with regard to the one time bar under the said section? - Held that:- As the earlier four show cause notices were issued prior to the introduction of the "Explanation" by Finance Act (N). (No.2) ACT 2014, the bar under section 32-O (1)(i) is not applicable. The argument made on behalf of the respondent that section 32-O(I)(i ) cannot be accepted, if one looks at the plain language of section 32-E(1) of the Act. The "Explanation" in section 32-O(I) (i ) stating that "the concealment of particulars of duty liability relates to any such concealment made from the Central Excise Officer" is in aid to and evidently in consonance with the opening part of the provisions contained in section 32-E(1) which provides "An assessee may, in respect of a case relating to him, make an application, before adjudication, to the Settlement Commission to have the case settled, in such form and in such manner as may be prescribed and containing a full and true disclosure of his duty liability which has not been disclosed before the Central Excise Officer having jurisdiction,…." (Emphasis supplied). Therefore, under section 32E(1) an application for settlement can be filed before the Commission where there is a non-disclosure of duty liability before the Central Excise Officer. Under section 32-O(1)(i) a person is barred from filing a subsequent application for settlement where he has suffered an order passed under section 32F(5) and therein the "Explanation" has been introduced that the concealment of particulars of duty liability "relates to any such concealment made from the Central Excise Officer". Thus, "Explanation" in 32-O(1)(i) is consistent with the statutory intent in section 32-E(1). As seen "Explanation" introduced is a reiteration of the statutory provisions in section 32E(1). Hence, the "Explanation" is clarificatory in nature. Therefore, as the bar under section 32-O(1)(i) was always in vogue, the submission in this regard on behalf of the respondent is unacceptable. Pursuant to the notice to show cause dated 25th May, 2010 for the period 3rd July, 2008 to 9th September, 2008, the respondents had filed an application for settlement on 22nd July, 2010 which was disposed of by order dated 26th November, 2010 by imposing penalty and interest. Then again pursuant to the show cause notice dated 9th July, 2010 the petitioner had filed an application for settlement on 12th April, 2011 which was disposed of by the Commission by passing an order imposing penalty. Therefore, as and when the Commission took up the application for settlement for hearing, no "earlier application" on the "identical" issue was "pending" before it. Hence, the section 32-O(2) since deleted, does not come to the aid of the respondents herein, that is the writ petitioners. In this context it is to be noted that a show cause notice was issued on 11th November, 2011 and the respondent had filed an application for settlement on 16th May, 2012 admitting the duty liability which was disposed of by order dated 12th October, 2012 by imposing penalty. As under section 32-O(1)(i) the bar to file subsequent application was always in vogue, in view of the clear finding in detail by the Commission that in the previous proceedings penalty was imposed for concealment of particulars of duty liability, the argument of the respondent on this issue cannot be accepted. In the instant case the learned Single Judge, in the judgement under challenge had overlooked paragraphs 24, 25, 28, 34 and 35 of the order dated 28th March, 2014 passed by the Commission dealing specifically with the earlier proceedings and the orders passed thereon, as noted hereinbefore. The said orders, under section 32M, are conclusive. That apart, as evident from the records, the respondents had accepted each of those orders passed by the Settlement Commission. It is clear from the order dated 28th March, 2014, particularly paragraphs 24 and 35 thereof, that earlier on four occasions the respondent herein was found guilty for concealment of duty particulars and penalty was imposed which the learned Judge had overlooked and thus erred in passing the judgement under challenge. The judgment and order of Single Judge of HC dated 26th August, 2014 cannot be sustained and is thus set aside and quashed - Decided in favor of revenue.

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• 2016 (4) TMI 1066
  Refund of Cenvat credit - Rule 5 of CCR Rules, 2004 - Rejected on the ground that respondents are not manufacturers - Inputs used in the manufacture of final products which were exported - Certificate of Chartered Accountant certifies the same - Respondents submitted that they were not making any claim in respect of credit availed on input services but only on credit availed on inputs and the average export clearance is less then 50% of the total clearance during the subject period - Held that:- there was no merit in the above Appeal. The appellant, did not disputed the factual correctness of the said contention. Therefore, there is no perversity in the findings of fact arrived at by the authorities below and there is no violation of Rule 5 ibid. - Decided against the revenue

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• CST, VAT & Sales Tax

• 2016 (4) TMI 1061
  Revision of assessment - Selling Dealer has not filed the monthly returns in Form-I with payment of tax to the respective Assessing Officer and the respondent had proposed to reject the returns already submitted by the petitioner - Revenue contended that as against the judgment relied upon by the petitioner the respondent therein preferred a Writ Appeal but the Division Bench has not granted any interim order in the Writ Appeal - Held that:- in view of the judgment of this court in the case of Althaf Shoes (P) Ltd., Vs. Assistant Commissioner (CT), Valluvarkottam Assessment Circle, Chennai - 6 [2011 (10) TMI 567 - Madras High Court], it is clear that the issue involved in the present Writ Petition is identical. Therefore, since the Division Bench has not granted any interim order, following the ratio laid down in the said judgment, the impugned orders are set aside and matter remanded back. - Petition disposed of

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• 2016 (4) TMI 1060
  Validity of notices of default assessment of tax and interest and the notice of default assessment of penalty - this Court had issued directions regarding the scope of the powers of the Value Added Tax Officer ('VATO') under Sections 59 and 60 of the DVAT Act. By the order dated 24th February 2016, the Court had required the authorized representative ('AR') of the Petitioner to appear before the VATO and produce all the documents as sought by the VATO. The AR of the Petitioner appeared before the AVATO on 29th February 2016 and produced the documents and information sought. Thereafter, the AVATO concerned did not call for any further information/clarification or response from the Petitioner. Held that:- the detailed directions had already been issued by this Court in M/s. Gullu's v. Commissioner, Trade & Taxes [2016 (3) TMI 768 - DELHI HIGH COURT], this Court once again directs that the appropriate orientation and training courses be conducted by the Commissioner, VAT for the officers of the DT&T in the DVAT Act in light of the decisions of this Court including the one in Capri Bathaid Private Limited v. Commissioner, Trade & Taxes [2016 (3) TMI 378 - DELHI HIGH COURT]. Accordingly, the impugned notices dated 14th and 15th March 2016 of default assessment of tax and interest and of default assessment of penalty issued by the AVATO, Ward No. 40, Delhi are hereby set aside and the matters are remitted to the AVATO concerned for a fresh determination after giving the Petitioner an opportunity of being heard and seeking whatever clarification/verification/information are required. - Petition disposed of

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• 2016 (4) TMI 1059
  Levy of entertainment tax - Water sport activities offered by Polo Amusement - Polo amusement contended that levy of ET under the ET Act is conditional upon the activity being "amusement" where people are given admission to an entertainment as defined under Section 2(a) - Held that:- the charging provision, Section 6 (1) enacts that tax is to be levied and paid on all payments for admission to any entertainment. Section 2 (m)(iv), in the Court's opinion, covers the payment made by visitors to the petitioner's club as charges since they are connected with the entertainment, the water sports activities (and not mere swimming) provided in the petitioner's premises. Section 2 (m)(iv), in effect, is that payment should be connected with an entertainment; the nomenclature of the payment is irrelevant. The only condition is that the payment should be connected with the entertainment, which are water sport activities in the present case. The added condition is that the payment should be one that an individual has to make as a condition of attending the entertainment. This condition is satisfied in the case of all those entering inside the Petitioner's club. If they want to use the water sports facilities, they have to make the payment for the entrances. Thus the requisite conditions are fulfilled. It is consequently held that there is no merit in the petitioners’ argument that participation in the activities provided by Polo Amusement to its subscribers’ guest, i.e. Sea Wave, Lazy River, Fun Slide, Kiddies Pool, Aqua Shute, Aqua Ball, Super slide, are not covered within the definition “entertainment” or that its facilities do not constitute places of entertainment, for the entry of which the amounts collected are liable to ET. Whether the order of the Appellate Authority (not the FC) could have resulted in imposition of liability greater than what was found by the ET Department at the stage of assessment - The assessing authority held that “As such the Entertainment Tax constitutes 20% of the total gate money received for any determination of ticket..” and directed that Entertainment Tax is levied on the facility @ 20% of the gross proceeding of gate money. Held that:- The Court does not see how the GNCTD can justify the additional imposition by the Commissioner. It is true that the Deputy Commissioner (i.e. the authority named as the appellate official under Section 15 (3)) is empowered suo motu revision to modify, annul, reverse or otherwise revise the assessment authority’s decision. However, that power-to modify or revise any assessment or demand can be invoked only if a separate show cause notice is issued, by virtue of proviso to Section 42 of the ET Act. That apart, the Deputy Commissioner could not have enlarged the scope of the proceedings before him, which was an appeal from the decision seeking to recover a much smaller amount. In this respect the submission of the petitioner and its reliance on State of Kerala v. Vijaya Stores [1978 (9) TMI 2 - SUPREME Court] is well founded. Validity of the notification dated 07.06.2007 - Petitioner argued that no distinction can be made between swimming as a sporting event, swimming as an activity undertaken in a hotel or such establishment and swimming in a facility like the one owned by the petitioner, and its Fun Club - Held that:- the Court finds this argument insubstantial. It is firstly well settled that in economic and fiscal matters, the legislative judgment is given greater deference than in areas where fundamental liberties are involved. Polo Amusement is here mixing two issues: the correctness of the decision of the FC on the one hand and the vires of the notification. So long as the order of the FC stood – there is no dispute that Polo Amusement could not- in the absence of any decision in W.P.(C) 1896/2002, have been subjected to taxation for the period covered in that writ petition. However, whether the activities in question were eligible or not for taxation were certainly a matter for the State to decide, in the exercise of its statutory power. There was no impediment of any kind, whatsoever, for the State to exercise that power. Thus, the issuance of the notification could not have been faulted. Demand of tax, interest and penalties - Held that:- there is some substance in the argument of Polo Amusement that assessment was made in respect of all days including holidays. To facilitate a better inquiry, the assessing authorities are directed to give one opportunity to Polo Amusement to establish the actual collections, based on their gate receipts and related books of account. If for any reason, the petitioner is unable to or does not produce complete records, the assessing authority can use any reasonable method, to estimate the receipts, and issue demands. It is clarified that the Court is not quashing the assessments and demands impugned; they shall be kept in abeyance and, having regard to the decision of the assessing authority, be appropriately modified or altered, while working out the final demands. Therefor, the order of the FC, holding that the assessee’s activity was not entertainment and not liable to Entertainment Tax, is set aside. At the same time, the Court holds that without properly invoking power under Section 42, the Deputy Commissioner (first appellate authority) could not have enhanced the demand made by the assessing officer. Accordingly, the order of the assessing authority is restored. - Decided partly in favour of revenue

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